EU Taxonomy: What it is and how IES can help you achieve it

Date Published

20th Jun 2022 @ 11:59
Ian Pyburn
Business Development Manager

EU Taxonomy is a new regulation produced by the European Commission that will ask large companies across the EU to classify and quantify how sustainable their investment activities are. All large organisations in the EU will have to report on these on an annual basis. This article will introduce the new regulation and show how IES can offer a range of short to long-term technical services to help investors deliver EU taxonomy targets across their portfolios. 

What is EU Taxonomy? 
EU Taxonomy is a new European directive that will provide investors with definitions for which of their economic activities can be classed as sustainable. It is a mandatory requirement that all investors who qualify as a large company submit the list of sustainable economic activities.

Benefits of Systems:

  • Attract investors interested in sustainability 
  • Creates security and due diligence for screening investments “greenwashing” 
  • Help companies to be climate-friendly and provide input to sustainability plans  
  • Help shift investments where they are most needed. Investments that are non-favorable from a climate point of view will be calculated based off the proportion of total investment activities 

EU Taxonomy is a classification system across all investment activities, not just assets, so is different to green building rating systems (e.g. EPBD, LEEED, BREEAM, GRES-B) for individual buildings (i.e. assets). 

What does this mean for you and what are the requirements?
EU Taxonomy will affect any large companies that has investments in the following sectors:

  • Buildings (construction and real estate activities)
  • Agriculture
  • Manufacturing
  • Electricity, gas, steam and air conditioning supply
  • Water, sewerage, waste
  • Transportation and storage
  • Information and Communication Technologies (ICT)

For each sector, there are lists of definitions and links to other EU directives/policies on minimum standards. For an investment activity to be classed as sustainable it must make a substantial contribution to one of 6 environmental objectives of the EU Taxonomy regulation (shown in Figure 1) while meeting the minimum standards in all of the other objectives (i.e. causing no harm to any other objective).  For example, if an investment causes a substantial contribution to climate change adaption but causes more pollution or affects a natural habitat or ecosystem in doing so, it will not be counted towards an investor’s EU Taxonomy report. Figure 1 also shows the first reporting year of each objective with climate change mitigation and adaptation investments being reported in 2022.

 


 Figure 1 shows the six objectives of EU Taxonomy and their first reporting year.


Companies that fall under the scope of the Non-Financial Reporting Directive (NFRD) (now called the Corporate Sustainability Reporting Directive) are the companies that will have to disclose their proportion of sustainable activities as part of EU Taxonomy. 

What are some examples of EU Taxonomy in practice? 
All six objectives have different requirements associated with them and to be classed as sustainable they must meet minimum technical requirements. So, taking investment activities involving buildings as an example:

  • For the construction of new buildings, the primary energy demand has to be at least 10% lower than the the nearly zero-energy building (NZEB) requirements and validated by an EPC or BER. (Activity 7.1)
  • For renovation of existing buildings, also requires a building to have a primary energy demand 10% lower than Nearly Net Zero Energy Building (nZEB) to be classed as a sustainable renovation  (Activity 7.2)
  • When buying a building built before 2021, it must be at least A-Rated to be classed as sustainable or be in the top 15% of the national building stock with evidence provided. (Activity 7.7)

How can IES help you achieve EU taxonomy?
The following is a list of specialist services IES can provide for companies obligated under EU Taxonomy:

  • Identify optimal route to EU Taxonomy compliance across investment portfolios and highlight the most cost-effective investments that are eligible under EU Taxonomy. 
  • Non-Domestic BERs or EPCs are required throughout the EU Taxonomy to validate energy performance across different portfolios. IES are a leading consultancy provider for global building regulations & green ratings compliance and are accredited Energy Assessors nationally who can produce these certificates at scale.
  • IES can help clients achieve cost-compliance with EU Taxonomy by using our software to inform renovation strategies for large organisations. IES have been providing renovation analysis for over 20 years and can help investors by assessing different options and identifying the most optimal strategy to EU Taxonomy targets (such as the primary energy demand being 10% lower than NZEB standards within buildings).
  • IES can provide cloud-based, 3D models of portfolios to allow for engagement and communication with every stakeholder needed for EU Taxonomy.
  • IES can provide interactive decarbonisation roadmaps, which can show the best route to net-zero for buildings and allow tracking of a building’s progress towards EU Taxonomy eligibility.
  • Finally, IES technology and services is approved under EU Taxonomy. Therefore, the procurement of energy simulation and technical consultation from IES for the improvement of energy performance of buildings can become part of your EU Taxonomy reporting. (Activity 9.3)

For more information on EU Taxonomy and how IES can help you achieve it, please contact Ian Pyburn at ian.pyburn@iesve.com or on +353 (0) 83 132 5702.


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